Hidden Cryptocurrency In Divorce: Guide for Family Law Attorneys

The increased use of cryptocurrency has complicated divorce proceedings. In some instances, spouses are turning to cryptocurrency as a vehicle for hiding assets.

This article explains what cryptocurrency is, how it’s acquired and signs to look for that suggest a spouse could be holding undisclosed cryptocurrency.

What Is Cryptocurrency?

Cryptocurrency is a type of currency that only exists in digital form. Transaction records are verified and maintained by a decentralized system using cryptography, a form of payment that uses encryption algorithms.

In contrast to traditional currency, it is not managed by a government. As a result, cryptocurrency platforms are unregulated and the value of cryptocurrency is especially volatile. For most cryptocurrencies, the value is not tied to the U.S. dollar or other fiat currencies. However, there are a few cryptocurrencies, such as Tether and DigixGlobal, that are pegged to the value of the U.S. dollar or gold.

Cryptocurrency has recently gained popularity for many reasons. Primarily, cryptocurrency is popular for the anonymity that comes with it. For instance, if you use cryptocurrency to make a purchase, no personal information is needed, which can enable identity theft and fraud. Additionally, transactions are quick and cheap. Conducting foreign transactions does not require foreign exchange rates, and transactions typically only cost a few pennies. As with many online banking transactions, the buying and selling of cryptocurrency can occur in seconds. For these reasons, cryptocurrency has become an increasingly popular investment.

A Deep Dive Into How Cryptocurrency Works

Cryptocurrency exists in the form of coins or tokens. Coins, like traditional currency, can be virtual, digital or tangible. They are most often used as a medium of exchange or a means of payment. Tokens are more complex and are defined as assets that exist on a blockchain. Tokens have a variety of uses, but most often represent ownership of a physical object, or grant a user access to platform-specific services and features.

Cryptocurrency can be acquired in various ways. While not overly common, cryptocurrency can be used as a form of payment for services. Cryptocurrency can also be acquired through mining, which involves large, powerful computers that solve mathematical equations in exchange for coins. Staking cryptocurrency is another way that it can be acquired, where the user agrees not to trade or sell the crypto for a specific period of time in order to earn additional coins.

Cryptocurrency is primarily transacted on privately-owned platforms called cryptocurrency exchanges. On these platforms, users can trade cryptocurrency for other crypto assets, like NFTs, digital and fiat currencies.

Essentially, cryptocurrency exchanges allow for cryptocurrencies to be traded similarly to how stocks are traded within an investment portfolio. Cryptocurrency exchanges can be centralized or decentralized.

Centralized cryptocurrency exchanges (CEX) act as an intermediary between the buyer and the seller. Think of a CEX as being similar to a stockbroker.

A decentralized cryptocurrency exchange (DEX) is a peer-to-peer service in which the buyer and the seller interact directly, similar to buying and selling stocks without the help of a stockbroker. The 10 most common centralized and decentralized cryptocurrency exchanges, per Messari as of April 23, 2025, are listed below.

Now that you understand where cryptocurrency is acquired and transacted, let’s dive into where it goes when purchased. Very similar to a physical wallet for traditional currency, cryptocurrency can be stored in a crypto wallet. As with a physical wallet, there are several types of crypto wallets, all of which have to do with the user’s preference and security requirements. The following chart summarizes the various forms of crypto wallets:

It is important to know that all wallets, whether custodial or noncustodial, or hot or cold, have a unique identifying number that allows users to send and receive crypto on the blockchain network, similar to a bank account number. All wallets also require a username, password and seed phrase to access. A seed phrase is a series of 12-24 words that functions similarly to a PIN number for a debit card. It is recommended that the seed phrase be written down and not stored electronically.

Now that you understand cryptocurrency and how it is transacted, acquired and stored, let’s look at the role it plays in divorce proceedings and what items to look out for.

Cryptocurrency & Divorce

As cryptocurrency has become more prominent, we have also seen it become more common in divorce cases, including cases where one spouse uses cryptocurrency to hide assets. Our experience is not uncommon. For example, a CNBC article profiled a New York woman whose former husband attempted to hide assets during their divorce using cryptocurrency. She stated, “I know of Bitcoin and things like that. I just didn’t know much about it. It was never even a thought in my mind, because it’s not like we were discussing it or making investments together.” During divorce proceedings, she became suspicious as her spouse claimed he didn’t have many assets when she knew he earned around $3 million annually. With the help of a forensic investigator, she discovered 12 bitcoins that, at the time, were worth a half million dollars.

In divorce proceedings, we often see circumstances where one spouse has historically managed the couple’s finances, such as overseeing family finances and paying bills. This information imbalance in the relationship can create an opportunity for that spouse to move marital funds around without the other spouse’s approval. With the increasing popularity of cryptocurrency, these spouses could easily convert marital assets to cryptocurrency without the other spouse knowing.

Signs Someone Might Be Holding Undisclosed Cryptocurrency

There are a few initial steps to take or items to look for that can help confirm or deny suspicions regarding the existence of undisclosed cryptocurrency:

1. Most cryptocurrency is still acquired through converting cash for cryptocurrency. As such, the primary source to review for undisclosed cryptocurrency would be bank, investment and credit card statements. Look for transactions with popular cryptocurrency exchanges, such as the ones included in the table above.
2. Look for funds moving to and from peer-to-peer payment services such as CashApp or Venmo. These services have also begun offering users ways of purchasing cryptocurrency through their platforms.
3. Review personal tax returns. In prior years, there was unclear guidance on what tax forms exchanges would issue holders, or how cryptocurrency would be reported on tax returns. In recent years, regulations about the tax reporting of cryptocurrency have solidified. Popular exchanges now issue year-end tax forms for holders and any gains and losses from cryptocurrency are required to be reported on Form 8949 to their personal tax return. Starting in 2020, cryptocurrency holders are required to check a box on page 1 of the return for the question “At any time during 20xx, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”
4. The presence of a written seed phrase (a list of seemingly random 12-24 words).
5. The presence of a cold wallet, which usually resembles a USB drive; however, they can be disguised as credit cards or key fobs.

Whether you uncover cryptocurrency transactions or still have suspicions, we suggest engaging a forensic accountant to get the necessary guidance to navigate hidden assets in divorce.

Cryptocurrency is no joke. It is difficult to identify, trace and quantify.

Need Help?

Our Forensic, Valuation & Litigation Support Group, which includes forensic accountants and Certified Fraud Examiners, can help identify hidden assets.

Contact us here or call 800.899.4623.